2018 (1) TMI 1668 - HC - Indian Laws

Dishonor of Cheque - suit for recovery under Order XXXVII of the Code of Civil Procedure, 1908 - whether suit was beyond limitation as the period of limitation under Article 35 of the Limitation Act, 1963 has to be construed from the date of the cheque and not from the date when the cheque is dishonoured - jurisdiction of the Trial court - cheque was issued in Agra and the Defendants were located in Agra - HELD THAT - Order XXXVII of the CPC lays down procedure for summary trials which are meant for quick adjudication of commercial transactions. The said procedure requires the parties to act with utmost diligence and alacrity. Once the suit under Order XXXVII of the CPC is filed and summons is issued, the Defendant is expected to file a memo of appearance within 10 days of the service of the summons. The Plaintiff has to then file a summons for judgment, which would be returnable in not less than 10 days. The question as to whether leave to defend is to be granted or not depends upon the case set up by the Defendant, both by way of pleadings as well as documents. The Court takes an overall view of the matter at that stage, which is clearly prior to the trial of the suit, to determine whether the Defendant has a triable case or not. Order XXXVII Rule 3 of the CPC uses the terminology that the court would not refuse leave to defend unless the facts disclosed by the Defendant do not communicate that he has a substantial defence to raise or the defence intended to be put up by the Defendant is frivolous or vexatious . Thus, the proviso to Order XXXVII Rule 3 of the CPC is worded in a double negative and the Defendant has to show a substantial defence which is not frivolous or vexatious. Error in the summons by the Trial court - HELD THAT - The Defendants were already well aware of the amount for which the Plaintiff had filed the suit as the initial summons in the suit issued on 4th July, 2014, clearly mentions the sum of ₹ 15,00,000/-. The Trial court in para 7 records that the wrong mentioning of the amount was merely a typographical error in the summons, which fact was conceded by the Defendants. Thus, this ground raised by the Defendants is not tenable. Jurisdiction - HELD THAT - The Plaintiff is located in Delhi and the delivery of the goods was made to the Defendants from the Plaintiff's Delhi office. The cheques which were issued by the Defendants to the Plaintiff were presented in Delhi. Even, the cheque of ₹ 15,00,000/- was presented in Delhi. Thus, under Section 20(c) of the CPC, part of the cause of action has arisen in Delhi. Limitation - HELD THAT - In a case like the present one, where there were a series of transactions between the parties and some amount remained outstanding, the giving of the cheque, which was given as a security, would not by itself construe the cause of action. It is only when the payment is not made and the person in whose favour, the cheque has been issued, seeks to encash the cheque and it is thereafter dishonoured, that the right to sue itself arises. Until and unless the cheque is dishonoured, the Plaintiff cannot maintain a suit under Order XXXVII of the CPC in case of a cheque. There could be a situation where a cheque which has been issued as security for a future payment would be presented only when amounts become due and payable in future. The law of limitation has been designed not to reject claims of parties but to only ensure that old claims are not re-agitated and there is a finality after a particular period. Though the transaction between the parties relates to supply of skimmed milk powder, the suit is a simple suit under Order XXXVII of the CPC based on a cheque. The cheque was valid on the date it was presented. It was returned due to 'insufficient funds'. It is the Defendants' contention that the cheque for ₹ 15,00,000/- has been issued as a security, however, there is no document to this effect. The Plaintiff simply submits that the cheque in question was dishonoured and that gave it a cause of action to file the suit for recovery. The cause of action arose only when the cheque was dishonoured and hence the suit is filed within limitation. Payment made - HELD THAT - The cheque that was dishonoured was for ₹ 15 lakhs. In the reply to the leave to defend, there is a mere bald denial of the receipt of these payments and the effect thereof is not clear - The Defendants, though did not file any documents with the leave to defend application, have placed on record in this appeal, a bank statement to support the payments made as enumerated in para 8 of the application. It does appear clearly that the Defendants ought to be given an opportunity to place the evidence on record. The application for leave to defend was accompanied by an affidavit. The Court while considering the said appeal has to keep the said application in mind. Defendants are accordingly, entitled to conditional leave to defend, subject to depositing a sum of ₹ 3,00,000/- in the Trial court within 10 days, which is the difference in the amount of the cheque of ₹ 15,00,000/- and the amounts claimed to have been paid by the Defendants - List before the Trial Court on 19.02.2018.

Summary

Issues Involved:
1. Error in the summons by the Trial court
2. Jurisdiction
3. Limitation
4. Payment made

Issue-wise Detailed Analysis:

(i) Error in the Summons by the Trial Court
The Defendants argued that the summons for judgment was issued only for ?4,09,089/- and not for the full amount of ?15,00,000/-. The court found that this objection was directed against the Registry of the Trial court and not the Plaintiff. The error was deemed a typographical mistake that did not affect the Defendants' awareness of the actual amount claimed. The initial summons clearly mentioned the sum of ?15,00,000/-, and the Trial court recorded that the wrong amount was a typographical error conceded by the Defendants. Thus, this ground was found frivolous and not tenable.

(ii) Jurisdiction
The Defendants questioned the jurisdiction of the Trial court, arguing that the cheque was issued in Agra and they were located in Agra. The court held that the Plaintiff is located in Delhi, the delivery of goods was made from Delhi, and the cheques were presented in Delhi. Under Section 20(c) of the CPC, part of the cause of action arose in Delhi, thereby confirming the jurisdiction of the Delhi courts.

(iii) Limitation
The Defendants contended that the suit was beyond the limitation period, arguing that the limitation should be construed from the date of the cheque (21st November, 2010) and not from the date of its dishonour (10th May, 2011). The court analyzed various judgments, including the Division Bench judgment in Rohini Strips v. Steel Authority of India Limited, which held that the limitation period starts from the date the cheque is dishonoured. The court found that the suit, filed on 8th May, 2014, was within the three-year limitation period from the date of dishonour, thus rejecting the Defendants' argument.

(iv) Payment Made
The Defendants claimed that they had already made payments against the cheque in question and provided details of three payments made post-issuance of the cheque. The court noted that the Plaintiff's reply was a mere bald denial without addressing the effect of these payments. The Defendants provided a bank statement supporting their claim of payments made. The court determined that the Defendants should be given an opportunity to prove these payments and reconcile the outstanding amount. Thus, conditional leave to defend was granted, subject to the Defendants depositing ?3,00,000/- in the Trial court within 10 days. Failure to deposit would result in the suit being decreed for the entire amount of ?15,00,000/- with interest.

Conclusion
The court granted conditional leave to defend, emphasizing the need for the Defendants to substantiate their claims of payments made. The Defendants were required to deposit ?3,00,000/- within 10 days to proceed with their defense. The case was listed for further proceedings before the Trial court on 19.02.2018.